Investing
Crowdfunding – the next big misselling scandal?
Published by Gbaf News
Posted on June 11, 2013
2 min readLast updated: January 22, 2026
Global Banking & Finance Review®
Company
Published by Gbaf News
Posted on June 11, 2013
2 min readLast updated: January 22, 2026
Crowdfunding is being promised as a wonderfully disruptive and democratic development in seed funding, however experts at Integral Finance warn that is poses the potential to become another financial misselling scandal.
According to Mark Hollingworth, director at Integral Finance, the information required to pitch a project to investors simply isn’t detailed enough. He says: “Currently, very few of the business cases on the main platforms are providing a competitive analysis of their proposition versus existing companies or potential competitors. Many of the pitches are also unclear in terms of their USPs and how they will distinguish themselves against the competition and only a handful describe a possible exit.”
There is also a significant lack of detail surrounding the issue of the long term funding requirements for each venture, which will impact on the total investment required to produce a positive trading cash-flow. Hollingworth continues: “Unless investors understand clearly how much funding is needed and for how long, there is a serious risk that they will not fully understand how much of the company they have actually bought. Amidst all the hype, there is a genuine risk that a wave of naïve investors will part with their money, only to come forward at a later date complaining that they thought they did not understand what – or how much – they were actually buying.”
Integral Finance is championing for more information to be disclosed on projects, thus reducing risk for investors and allowing them to make a truly informed decision before they part with their cash.
Hollingworth adds: “These platforms need to insist on better information for potential investors from the projects they allow on their platforms. They need to recognise the risks that come with providing incomplete information and systematically ensure that the projects using their platforms answer the key questions required to make an informed decision about where to invest.
“The main platforms seem to be hiding behind generic warnings, self certifications and cursory due diligence on factual claims and we would like to see a minimum requirement to disclose the total expected pre-trading cash requirements, both to protect the investor community and the reputation of the crowdfunding platforms themselves. Otherwise we predict too many will lose their money, and the spectre of another financial scandal.”
Explore more articles in the Investing category
